SEC Proposals – ADV Part 3

May 11, 2018

On April 18, 2018, the Securities and Exchange Commission (SEC) voted to propose rules and interpretations that, among other things, are designed to enhance the transparency of investor’s relationships with investment advisers. Two of the SEC’s proposals that pertain to investment advisers are:

  • Form CRS/ADV Part 3 Relationship Summary – The SEC has proposed new and amended rules and forms under the Investment Advisers Act of 1940 that would require registered investment advisers to provide a brief relationship summary to retail investors. Form CRS would provide investors with easy-to-understand information about their relationship with their investment professional. Form CRS would be a supplement to more detailed disclosures investment advisers provide in the Form ADV.  As proposed, Form CRS would be a standardized, short-form (4-page maximum) disclosure designed to highlight differences in principal types of services offered, fees clients might pay, and certain conflicts of interest that may exist. Form CRS is also being referred to as the Form ADV Part 3. The SEC has already prepared instructions for preparing and filing the Form ADV Part 3, including instructions for delivery requirements, initial filings, and updating filings. Click here to read the Form ADV Part 3/Form CRS general instructions.
  • Proposed Investment Adviser Interpretation –  Under the Investment Advisers Act of 1940, an investment adviser is a fiduciary. The SEC proposed interpretation reaffirms and, in some cases, provides clarification regarding the SEC’s views of the fiduciary duty that an investment adviser owes to its clients. In this proposal the SEC is also requesting comment on: licensing and continuing education requirements for personnel of SEC registered investment advisers; account statement delivery to clients with investment advisory accounts; and financial responsibility requirements for SEC registered investment advisers, which would include fidelity bond requirements.

Click here to read the SEC’s Press Release about these proposals.

The SEC is seeking public comments on the proposed rules and interpretations until July 18. RIA Compliance Consultants will continue to monitor the status of Regulation Best Interest, Form CRS, and the proposed investment adviser interpretation and will provide updates as they become available.

Posted by Grant Parr
Labels: ADV Part 3